The problem with the Government’s approach to implementing the recommendations of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry is that, on the available evidence, it has failed to pay enough heed to either practicality or industry history.
As an example, if those advising the Treasurer, Josh Frydenberg, had taken the time to consider the history and workings of Australia’s MySuper and intrafund advice regimes then they may have stopped short of virtually rubber-stamping the recommendation of the Royal Commissioner, Kenneth Hayne, that “deduction of any advice fee (other than for intra-fund advice) from a MySuper account should be prohibited”.
If those advising Frydenberg had then looked to examine the proceedings of the Parliamentary Joint Committee on Corporations and Financial Services and evidence given by Australian Securities and Investments Commission (ASIC) commissioner, Danielle Press, they would have discovered that the regulator regards intra-fund advice as entailing the delivery of personal advice.
In other words, Hayne misunderstood intrafund advice and, in doing so, it is arguable that his recommendation pertaining to banning advice fees in MySuper warrants a revisit on the part of the Treasury rather than the rubber-stamping that currently seems likely to occur.
That is why both the Association of Financial Advisers (AFA) and the Financial Planning Association (FPA) have been right to so publicly urge that the Government reconsider the whole issue of MySuper and advice fees.
It is also clear that Hayne failed to familiarise himself with the history of MySuper, the manner in which it grew out of the so-called Cooper Review and the rather cowardly policy acknowledgement that a low-cost product should be developed because some superannuation fund members were simply unlikely to ever engage in their superannuation.
The result was that under the portfolio direction of former Labor financial services minister, Bill Shorten, a whole raft of existing default funds were converted to MySuper products.
Yes, MySuper does represent a low-cost default option for those who are largely disengaged with their superannuation, but that does not mean that all members of MySuper options are disengaged or that they do not want to access financial advice.
The reality that Hayne failed to recognise was that his recommendation stood to place members of MySuper options at a disadvantage to their counterparts who are members of the same fund but are in choice options and he did so with the somewhat blithe observation that “it is difficult to imagine circumstances in which a member would require financial advice about their MySuper account. If a member wants financial advice, the cost of that advice should be charged to and paid by the member directly”.
It is a statement which might sound reasonable to a lawyer with a significant six figure income but paying for advice outside of superannuation is a far more daunting prospect for a MySuper member of far more modest financial means.
The Government would do well to consider the responses of the financial planning industry to its legislative approach to implementing the Royal Commission recommendations and accept that Hayne was not without flaw and some of those flaws have become more than obvious.
